key takeaways the non-wires solutions implementation playbook · in the non-wires solutions...
TRANSCRIPT
KEY TAKEAWAYS
THE NON-WIRES SOLUTIONS IMPLEMENTATION PLAYBOOKA PRACTICAL GUIDE FOR REGULATORS, UTILITIES, AND DEVELOPERS
BY MARK DYSON, JASON PRINCE, LAUREN SHWISBERG, AND JEFF WALLER
RO
CKY MOUNTA
IN
INSTIT UTE
ABOUT US
ABOUT ROCKY MOUNTAIN INSTITUTERocky Mountain Institute (RMI)—an independent nonprofit founded in 1982—transforms global energy use to
create a clean, prosperous, and secure low-carbon future. It engages businesses, communities, institutions, and
entrepreneurs to accelerate the adoption of market-based solutions that cost-effectively shift from fossil fuels to
efficiency and renewables. RMI has offices in Basalt and Boulder, Colorado; New York City; Washington, D.C.;
and Beijing.
RO
C
KY MOUNTAIN
INSTIT UTE
AUTHORS Mark Dyson, Jason Prince, Lauren Shwisberg, Jeff Waller
* Authors listed alphabetically. All authors from
Rocky Mountain Institute unless otherwise noted.
CONTACTSJason Prince, [email protected]
Jeff Waller, [email protected]
SUGGESTED CITATION Prince, Jason, Jeff Waller, Lauren Shwisberg, and
Mark Dyson, The Non-Wires Solutions Implementation
Playbook: A Practical Guide for Regulators, Utilities,
and Developers. Rocky Mountain Institute, 2018.
http://www.rmi.org/insight/non-wires-solutions-
playbook/
Images courtesy of iStock unless otherwise noted.
ACKNOWLEDGMENTS The authors would like to extend special
thanks to the following organizations for their
contributions to this work:
US Climate Alliance
Wilson Sonsini Goodrich & Rosati
The authors also thank the individuals from the
following organizations, among others, who contributed
their time, perspectives, and expertise to this work:
Avangrid
California Efficiency and Demand Management Council
California Energy Storage Alliance
California Public Utilities Commission
ConEdison
Consumers Energy
DC Department of Energy and Environment
Duke Energy
Enbala
Eversource Energy
Fluence
Great River Energy
Green Mountain Power
Grid Lab
Grid Policy
GridSolar
Hawaii Public Utilities Commission
Hawaiian Electric Company
Key Capture Energy
Liberty Utilities
Long Island Power Authority
National Grid
Navigant
Nest
New Energy Advisors
New York Department of Public Service
Office of the Governor, New York State
New York Power Authority
Newport Consulting Group
Pacific Gas & Electric
Regulatory Assistance Project
Rhode Island Office of Energy Resources
Southern California Edison
Stoel Rives LLP
Strategen
Sunrun
Tendril
Vote Solar
Wood Mackenzie
AUTHORS & ACKNOWLEDGMENTS
4 | ROCKY MOUNTAIN INSTITUTE
KEY TAKEAWAYS FROM THE NON-WIRES SOLUTIONS IMPLEMENTATION PLAYBOOK
The dynamics of today’s electric grid do not ensure
that energy is efficiently distributed or that capital
is efficiently allocated. Increasingly, portfolios of
distributed energy resources (DERs)—also known
as non-wires solutions (NWS)—can address these
current inefficiencies by solving grid needs more
cost-effectively than business-as-usual approaches
to traditional infrastructure investment.
NWS are applications of DERs in specific locations
that defer or eliminate an investment in traditional
and costlier “wires-and-poles” infrastructure. In
addition to deferring or avoiding more expensive
traditional investments and providing reliable
electric service, NWS can deliver ratepayers cost
savings and support the integration of smart,
customer-centered technologies that promote
a cleaner, more flexible, and more resilient grid.
However, despite these clear benefits, three key
barriers have hampered widespread non-wires
solution deployment: regulatory environments
are not appropriately designed to encourage
NWS, utility standard operating procedures do not
systematically consider NWS, and procurement
practices need to be refined to more effectively
source NWS.
To help overcome these barriers and capture the
compelling benefits NWS can provide, Rocky
Mountain Institute published The Non-Wires
Solutions Implementation Playbook: A Practical
Guide for Regulators, Utilities, and Developers.
The Playbook delineates innovative approaches to
spur non-wires solution adoption and recommends
planning and operational strategies to improve non-
wires solution processes. This document summarizes
key takeaways.
Utility investment in distribution infrastructure
is big business
Since 2006, regulated utilities across the US
have invested $55 billion each year, on average,
in distribution, transmission, and generation
infrastructure.1 Historically, distribution infrastructure
has represented the greatest share of utilities’
expenditures as utilities seek to maintain and
modernize extensive last-mile networks to serve
hundreds of millions of electricity end-users.
Utilities have an incentive to make these investments
because they are entitled to earn a regulator-
approved rate of return on the capital expenditures
that are included in their rate base (e.g., power plants,
distribution lines, transformers). Even as electricity
sales and peak demand have stayed flat in recent
years, utility investments added to the rate base have
increased. The rising ratio of utility distribution assets
per customer raises concerns that rates may increase
as the cost of distribution investments are passed
through to customers for years to come.2 To mitigate
this risk, it is critical that grid investment decisions are
prudent and result in the most cost-effective solutions.
Distributed energy resources can be used as non-
wires solutions to save ratepayers money
Utilities and regulators can adapt existing planning
processes in order to consider all possible solutions
when making investments to address grid needs.
Specifically, by taking advantage of the proliferation
of distributed energy resources (DERs) and energy
management software solutions, planning processes
can ensure grid services are provided by the most
cost-effective options, and provide safe, reliable
electric service for customers.
In The Non-Wires Solutions Implementation Playbook,
we define DERs to include distributed generation (e.g.,
rooftop or community-scale solar PV), energy storage
(e.g., batteries), and both software and hardware
approaches to energy efficiency and demand
response—technologies that generate electricity or
KEY TAKEAWAYS
KEY TAKEAWAYS: THE NON-WIRES SOLUTIONS IMPLEMENTATION PLAYBOOK | 5
KEY TAKEAWAYS
control loads and are directly interconnected to low-
voltage electric distribution systems.
When DERs are used to solve grid needs that
would have otherwise required traditional utility
infrastructure, they can be considered non-wires
solutions (NWS). NWS are applications of DERs
in specific locations that defer or eliminate an
investment in traditional and costlier “wires-and-
poles” infrastructure. NWS have also been called
non-wires alternatives (NWA), which implies that they
will be evaluated as alternatives to wires-and-poles
infrastructure. In contrast, the terminology of “non-
wires solutions” institutionalizes NWS as part of the
utility’s standard solution toolkit, implying that they
should be considered as part of a basic set of options.
Non-wires solutions provide a host of benefits
and should be a key component of innovative
distribution planning processes
States and utilities can incorporate NWS into
distribution-level grid modernization and integrated
planning efforts that are increasingly taking place
across the nation. In addition to cost savings, the
effective integration of NWS into planning processes
can help capture the range of benefits that DERs and
NWS provide, including:
• Ratepayer cost savings: Since NWS are typically
pursued only if they are determined to be more
cost-effective than alternative infrastructure options,
they should lead to lower costs for ratepayers.
• Flexibility for planning processes: Instead of
investing in new infrastructure projects based on
long-term, uncertain forecasts, planners can deploy
modular, flexible NWS portfolios when and where
they are needed. This mitigates the risk that large
investments will become stranded if load growth
doesn’t materialize as forecasted and provides a time-
value-of-money benefit because more significant
expenditures can be delayed until needs are realized.
• Progress toward clean energy goals: NWS projects
deliver value by deferring or eliminating the need for
traditional infrastructure. By stimulating demand and
increasing the adoption of low-carbon resources
like energy efficiency and demand response, NWS
reduce the need for marginal, more carbon-intensive
generation.
• Opportunities to test new utility business models:
Utilities can use NWS to experiment with new ways of
engaging with their customers as well as innovative
technology companies. As utilities adapt to a changing
set of consumer preferences, NWS can provide an
opening to partner with customers and create DER
programs that improve customer satisfaction and
reduce the probability of ratepayer defection.
• Local economic development: Rather than
deploying traditional utility-owned infrastructure,
NWS can provide opportunities for local investment
in communities where customer-sited solutions can
address grid needs.
• Job creation: Whereas traditional infrastructure
equipment markets are mature, NWS projects
support the animation of DER markets where rapid
innovation is unlocking significant potential for new
job growth.
To scale NWS several important market barriers
must be addressed
Despite their benefits, markets for NWS remain
nascent. Although utilities across the nation spend
tens of billions of dollars each year on distribution
infrastructure, only a few have pursued NWS at scale.
This sluggish uptake is due to a number of barriers,
including:
Regulatory frameworks that do not always
encourage NWS
• Traditional cost-of-service utility regulation
incentivizes capital investment in grid infrastructure
that is not easily compatible with NWS, which are
designed to provide cost-savings.
• Distribution planning processes have historically
been opaque, making it difficult for regulators
and market participants to identify and develop
alternative solutions to address utility grid needs.
KEY TAKEAWAYS
Limited utility processes and expertise around NWS
• At most utilities, institutional capabilities are not yet
sufficiently robust to effectively plan for, procure, and
manage NWS at scale.
• Utilities do not currently have enough readily
available data to verify performance of demonstrated
DER capabilities in non-wires solution applications.
Limited procurement experience, which inhibits
competitive non-wires solution proposals
• Without clear standards or precedents, it is
challenging for utilities and developers to efficiently
work together through NWS procurement processes.
• To produce more competitive offers, developers
require greater clarity on both the nature of grid
needs that are suitable for NWS and the criteria
utilities use to evaluate bids.
• In certain applications, potentially higher costs and
longer deployment timelines may limit initial NWS
project competitiveness.
Compounding these barriers, there is a need for
coordination between four key sets of stakeholders
to support NWS market development. As illustrated
in Figure 1 below, legislators, regulators, utilities,
and developers have the opportunity to take on
distinct—and overlapping—roles and responsibilities
to establish, cultivate, and guide the NWS market.
Legislatures can choose to play a key role in the
earlier stages of NWS market development, but
collaboration from the other three stakeholder groups
is critical throughout the entire NWS life cycle.
6 | ROCKY MOUNTAIN INSTITUTE
KEY TAKEAWAYS: THE NON-WIRES SOLUTIONS IMPLEMENTATION PLAYBOOK | 7
KEY TAKEAWAYS
ROLES & RESPONSIBILITIES LEGISLATURE REGULATORS UTILITY DEVELOPERS
Group is engaged
Define a vision.Who determines the vision for pursuit of
non-wires solutions in a given jurisdiction?
Develop incentives.Who is responsible for creating and defining
the incentives?
Consider projects systematically.
Who ensures that non-wires solutions are consistently considered
as part of the utility planning process?
Articulates a vision by introducing bill that supports new
procurement practices
Provides impetus for non-wires
solutions incentives through legislation
Mandates that utilities consider
non-wires solutions that
meet prescribed criteria
Initiate a proceeding to support vision
development and implementation of
non-wires solutions
Develop the appropriate
incentive structure for non-wires
solutions
Define the process for
how non-wires solutions
projects are considered
Expresses goals for implementation
and how the non-wires solutions
support their business
Engages in developing the
incentive framework for non-wires solutions or
proposes incentives to regulators
Ongoing rolein stakeholderengagement
processes
Establishes internal processes for consideration
of non-wires solutions
Identify screening criteria. Who designs the screening criteria
for non-wires solutions?
Share data.Who decides whatutility data is made
available?
Define the process for
determining the criteria for
identification of non-wires solutions
Define requirements and
process for sharing data to support development of
non-wires solutions
Refines screening criteria
for particular circumstances
Ensures data is collected and shared to enable non-wires
solutions while maintaining
customer and data security
PHASE 1Creating a hospitable environment for non-wires solutions
PHASE 2Identifying non-wires solutions opportunities
Table is continued on the next page
FIGURE 1
NWS ROLES AND RESPONSIBILITIES
8 | ROCKY MOUNTAIN INSTITUTE
KEY TAKEAWAYS
Scope the procurement.
Who determines needs and
opportunities for non-wires solutions?
Identify applicable technologies.
Who determines what technologies are
appropriate solutions to meet identified needs?
Facilitate project development,
including approvals, cost recovery decisions, and
process oversight (ongoing)
Determine assetownership.
Who owns the project?Are there any
regulatory restrictionsor requirements?
Integrate technology portfolio.
Who determinesthe appropriatetechnological
solutions to meetthe need identified?
Oversee operationsand dispatch.
Who directs theoperations of the
project?
Manage performance.Who assumes project
performance risk?
Administer measurement and
verification.Who is responsible
for ongoing measurement and verification?
Determines needs and
opportunities with data-based
problem descriptions
Defines solutions to be
technology-agnostic and
performance-based
Integrates portfolio of solutions to meet need
Owns some or all of the
components in a non-wires
solutions portfolio
Directs project operations to
meet needs and controls owned
assets
Assumes risk for ultimate grid reliability and
performance risk outlined in third-party contracts
Requires and conducts specific measurement and
verification practices to collect
operational data
Control assets under contract per
utility terms, instructions, and
signals
Accept contracted
performance risk associated with assets owned
and contracted to utility
Perform ongoing measurement and
verification to demonstrate
performance per contract terms
Propose new and refine
existing needs based on utility and other data
Propose technologies and
portfolios of solutions that can most e�ectively address needs
Integrate portfolio of solutions to meet
need through contract with utility
Own some or all of the
components in a non-wires solutions portfolio
ROLES & RESPONSIBILITIES LEGISLATURE REGULATORS UTILITY DEVELOPERS
Group is engaged
PHASE 3Developing and executing the procurement
PHASE 4Implementing non-wires solutions
FIGURE 1 (CONTINUED)
KEY TAKEAWAYS: THE NON-WIRES SOLUTIONS IMPLEMENTATION PLAYBOOK | 9
KEY TAKEAWAYS
The Non-Wires Solutions Implementation
Playbook can help overcome barriers and scale
the NWS market
The Playbook seeks to address the barriers to NWS
and catalyze deployment across the nation. It draws
upon interviews conducted with more than 65 experts
across 15 states, including over 20 utilities, as well as
developers, regulators, and trade associations. The
intent is to provide a common set of recommendations
that any jurisdiction can build upon to directly implement
and scale NWS.
The Playbook is composed of two sections:
1. Best Practice Framework
First, we provide an in-depth discussion of best
practices for the three enabling factors that are
critical for NWS implementation: a supportive
regulatory environment; the integration of NWS into
standard utility operating procedures; and holistic
processes for NWS procurement.
2. Implementation Guidelines
Second, we provide practical implementation
guidelines for the four key components underpinning
non-wires solution implementation: screening
criteria; competitive solicitation processes; evaluation
frameworks; and contracting considerations.
As with all effective practices, non-wires solution
processes are likely to evolve as lessons are learned—
and incorporated—from NWS procurement and
implementation. While there were only ~2 GW of
non-wires solution project capacity at different stages
of development as of April 2017, there is significant
opportunity for rapid acceleration of NWS deployment
as best practices are adopted and standardized.3
THE SCALE OF THE NWS OPPORTUNITY IN A CHANGING GRID
Non-wires solutions can improve the system
benefits of DER deployments and help realize
more than $17 billion in additional net present
value from DERs through 2030 across the US
Directly capturing the distribution-level benefits
(e.g., distribution capacity deferral value4) of DERs
at the project level via NWS can dramatically
increase the system value of DERs. In light of
the disparity in the quantification of avoidable
costs (e.g., investment deferral opportunities)
across distribution systems noted by other
analysts,5 and the corresponding difficulty in
assigning a single value to distribution benefits,
we instead highlight a few examples where
NWS or similar programs that capture value from
avoided costs on the distribution system can
significantly improve the benefits available from
DER deployment. Based on three illustrative
examples, we find that including distribution-level
benefits can improve system value of energy
efficiency and demand flexibility measures by
30%, and battery storage by over 100%. In many
cases, DERs are even cost-effective when only
evaluated based on avoided generation costs.
Using an average value of peak reduction
for transmission and distribution,6 we find
that the additional, distribution-level avoided
costs associated with the DER scenario are
approximately $17 billion through 2030.
Non-wires solutions can unlock higher levels
of DER deployment, offering significant
carbon emissions reductions
Increasing DER deployment can provide carbon
KEY TAKEAWAYS
Section 1: Best Practice Framework
To help scale the NWS market, we have identified
three key elements that are critical for creating and
sustaining successful NWS programs: establishing
a supportive regulatory environment, integrating
NWS into standard utility operating procedures, and
creating a holistic process for NWS procurement. Each
element is underpinned by a series of best practice
recommendations listed below which, in the aggregate,
create the necessary conditions to support the full life
cycle of NWS deployment.
1. Establish a supportive regulatory environment.
The regulatory environment, including rulings,
precedents, and ongoing processes, is instrumental
for enabling a scalable market for NWS in a
particular jurisdiction. The regulatory framework at
its best can elicit flexible responses from utilities
and solution providers to ensure reliability and
meet cost-reduction goals without being overly
prescriptive.
Experience from non-wires solution projects across
the US suggests that a supportive regulatory
environment for NWS can:
a. Leverage the legislature to drive systematic
consideration of NWS
b. Provide an appropriate incentive structure
to encourage utilities to pursue NWS projects
c. Clarify screening and evaluation criteria
to efficiently identify and assess NWS
opportunities
d. Enable data transparency and access for
solution providers
e. Encourage DER forecasting to identify
potential low-cost NWS that could take
advantage of organically-adopted DERs
f. Support collaborative stakeholder
processes to allow for input into NWS
processes from all interested and affected
stakeholders
emissions reductions via both direct and indirect
mechanisms.7 DERs can help realize direct
carbon reductions by avoiding carbon-intensive
electricity generation on the bulk power system,
either by reducing line losses, saving energy
through efficiency measures, load shifting, or
generating energy from distributed low-carbon
sources. DERs can also enable indirect carbon
savings by providing flexibility, thus reducing
curtailment from and incentivizing investment
in low-cost, zero-carbon, but variable energy
resources like wind and solar.
While it is clear that the potential to reduce CO2
through DER deployment is large, it is difficult to
forecast the total magnitude by which NWS can
increase deployment of DERs. As a conservative
forecast, we evaluated the extent to which
valuing the distribution-scale benefits of DERs
would increase the cost-effective magnitude
of deployment for both energy efficiency and
demand flexibility. We find that increased
cost-effective DER deployment and demand
flexibility, enabled by valuing distribution
benefits via NWS, would lead to approximately
6% greater CO2 savings compared to the case
in which distribution benefits are not valued in
cost-benefit analysis. Combining that finding
with the sensitivity analysis described above
suggests that enabling distribution system
revenue via NWS, scaled nationally, could avoid
approximately 300 MT CO2 over an assumed
20-year lifetime of DER assets.
10 | ROCKY MOUNTAIN INSTITUTE
KEY TAKEAWAYS: THE NON-WIRES SOLUTIONS IMPLEMENTATION PLAYBOOK | 11
KEY TAKEAWAYS
UTILITY STRUCTURE
REGULATORY ENVIRONMENT
PROCUREMENT PROCESS
2. Integrate NWS into standard utility operating
procedures. Processes and organizational
structures within utilities can either facilitate or
act as barriers to NWS-oriented planning and
procurement. Advanced utility processes can allow
for the fair comparison of NWS against traditional
solutions and encourage the effective engagement
of external market participants to best meet
regulatory and utility-level objectives.
Utility experience in non-wires solution projects
suggests that a well-designed set of organizational
processes within a utility can:
a. Consolidate accountability for non-wires
and traditional solutions within a single
interdisciplinary utility team to facilitate fair
assessment between different approaches
b. Allow for both utility- and provider-led
integration of diverse technologies to meet
grid needs
c. Scale successful non-wires solution pilots
to scaled deployment to maximize learning
and provide the greatest economic benefit
FIGURE 2
BEST PRACTICE FRAMEWORK
12 | ROCKY MOUNTAIN INSTITUTE
KEY TAKEAWAYS
3. Employ a holistic process for non-wires solution
procurement. Well-designed procurement
practices can help ensure that opportunities to
offer solutions are made available to the market in
an efficient and fair manner that enables effective
proposal development.
Utility and solution provider experience to date
suggests that procurements should consider the
range of options for sourcing NWS, including pricing
and expansion of customer programs, in addition to
dedicated procurement via competitive solicitation.
Since competitive solicitations have historically
been a predominant sourcing mechanism used for
non-wires solution projects, the Playbook focuses
on two key sets of recommendations to improve
solicitation practices:
1. Process enhancements for the methods by which
non-wires solution solicitations are developed:
a. Engage developers and other
stakeholders throughout the
procurement process
b. Consider the role of third parties
in procurement
2. Best-fit technical approaches for developing
the content of an RFP to maximize the probability
of receiving technically feasible and cost-
competitive results:
a. Provide data-rich needs descriptions
for the solutions being requested
b. Elaborate performance attributes
for solutions rather than technology
requirements
c. Provide clear proposal evaluation criteria
as part of the solicitation
d. Keep options open for further DER
market evolution, including wholesale
market participation and/or distribution-
level service pricing
e. Lay out clear requirements in project
contracts to fairly allocate risk and ensure
operational reliability
The Playbook’s recommended best practices can be
implemented in any utility context
While the Playbook cites many examples drawn
from non-wires solution experiences in New York
and California, the recommended best practices are
applicable nationwide. Because every jurisdiction will
need to adapt these recommendations to suit local
circumstances, we provide guidance on how these
recommendations can be applied in different contexts.
The following table outlines the key considerations
for implementing the framework recommendations
in three archetypical market structures: vertically
integrated investor-owned utilities (VIU), investor-
owned utilities in restructured states (wires-only utility),
and consumer-owned and nonprofit utilities.
KEY TAKEAWAYS: THE NON-WIRES SOLUTIONS IMPLEMENTATION PLAYBOOK | 13
KEY TAKEAWAYS
RECOMMENDATIONSVERTICALLY INTEGRATED
UTILITYWIRES-ONLY UTILITY
CONSUMER-OWNED AND
NONPROFIT UTILITIES
• VIUs own transmission,
distribution, and
generation and
traditionally earn a
regulated rate of return
on prudently invested
capital.
• Wires-only utilities own
distribution assets (not
generation) and earn a
regulated rate of return
based on their cost of
service.
• Consumer-owned
and nonprofit utilities
do not seek to earn a
return for shareholders.
Their rates are not
typically regulated by
state agencies but are
overseen by boards or
city councils.
REGULATORY • Support performance-based ratemaking
• Provide guidelines for screening and evaluation
• Engage in stakeholder processes
• Develop internal criteria
• Align utility executive
and customer interests
UTILITY • Internal expert team
• More likely to serve as
solution integrator
• Limited ownership of
generation
• Utility or third-party
integrator
• Leaner internal team
• More likely to have third-
party integrators
PROCUREMENT • Institutional expertise • Less experience
with generation
and interaction with
wholesale markets
• Encourage competitive
participation
• May need to address
self-generation caps
FIGURE 3
SUMMARY OF MARKET-SPECIFIC CONSIDERATIONS FOR BEST PRACTICE RECOMMENDATIONS
14 | ROCKY MOUNTAIN INSTITUTE
KEY TAKEAWAYS
Section 2: Implementation Guidelines
After detailing the best practice frameworks for
developing robust NWS programs, we turn from
outlining enabling conditions to providing practical
guidelines that regulators and utilities can adopt to
procure NWS projects at scale. This section includes
detailed considerations for four central elements
underpinning the successful implementation of NWS:
1. Screening Criteria
Traditional planning processes can better support
NWS if screening criteria are used to determine
when NWS should be considered for a given
need. Planners can apply criteria related to need
characteristics like cost, timing, and type to screen
if a non-wires solution project is likely to be viable.
This screening encourages productive market
engagement by helping utilities and developers
efficiently allocate resources to the best non-wires
solution opportunities. While a helpful prioritization
tool for a nascent non-wires solution market, as
utilities gain more NWS experience screening
criteria can evolve to be more inclusive of a wider
universe of potentially viable NWS.
2. Competitive Solicitation Processes
Once a decision has been made to pursue NWS
through a competitive solicitation, the RFP should
be designed to maximize the number of technically
acceptable, cost-effective bids. For decades, utility
procurement departments have run solicitation
processes for traditional assets, but non-wires
solution solicitations require new and different
considerations. To scale this market, it is important
that solicitations are drafted with appropriate
specificity, flexibility, and transparency. For
example, solicitations should describe problems in
terms of system needs, and solutions in terms of
required performance attributes. They should also
provide respondents with detailed participation
instructions, clear evaluation criteria, and sufficient
time to respond.
3. Evaluation Frameworks
NWS represent a new type of procurement to solve
critical grid needs. Since NWS may span traditional
lines of supply, demand, and infrastructure,
they require a well-considered comprehensive
evaluation methodology. Evaluation must consider
both the technical ability of a non-wires solution to
meet the grid need and its cost-effectiveness in
doing so. Technology-specific risks associated with
technical non-wires solution performance can be
assessed at the project and portfolio levels, and
can inform risk-mitigation strategies like operational
contingencies that may be included in an overall
portfolio evaluation. Traditional cost-effectiveness
tests can more appropriately suit the non-wires
solution context if adapted to evaluate portfolios of
different resource types, use location-specific data,
and include all the benefits that NWS can provide.
Finally, providing the market transparency into
specific evaluation methodologies would support
more effective bid development.
4. Contracting Considerations
Utilities have a long history of contracting for
third-party services and are able to draw on
those precedents when negotiating terms with
third-party owners of NWS projects. To a large
extent pro forma non-wires solution contracts
can mirror existing utility documents. However,
there are four key areas—dispatchability, payment,
performance, and construction—that require the
most attention to effectively adapt standard contract
clauses to the non-wires solution context. These
adjustments are necessary because risk profiles
for certain non-wires solution technologies differ
from traditional grid infrastructure. Since the non-
wires solution market is not yet mature, there is no
broad agreement on how these risks should be
allocated, and the lack of consensus slows down
the negotiation process between utilities and
developers. This section outlines the provisions that
require the most modifications from typical utility
contracts to accommodate the non-wires solution
KEY TAKEAWAYS: THE NON-WIRES SOLUTIONS IMPLEMENTATION PLAYBOOK | 15
KEY TAKEAWAYS
context. In addition, it identifies certain market
solutions to the risk-balancing exercise between
utilities and developers that can be adopted across
technologies, as well as some technology-specific
considerations.
Conclusions
The market for NWS is nascent but represents a
promising opportunity for reducing customer costs
and enabling a lower-carbon electricity grid. With the
increase in spending on distribution infrastructure,
there is a pressing need to turn to approaches like
NWS to minimize the impact on customer bills. At the
same time, NWS can unlock additional value from DERs
while both reducing net system costs and promoting
the cost-effective deployment of resources that are
important for reducing CO2 emissions.
Non-wires solutions are thus a key priority for near-
term action and can help lay the groundwork for
future opportunities to scale the market for DERs as a
core component of cost-effective grid infrastructure.
Pursuing NWS today can help to further develop best
practices, highlight the most valuable opportunities for
non-traditional solutions, and prove the case for a more
uniform, comprehensive market for NWS in the future.
Specific opportunities exist in a few key areas:
• Enabling the transparent and equitable valuation
of location-specific services. Pursuing NWS today
can shed light on how locational value can most
efficiently be made transparent and accessible to
DERs through programs that encourage procurement
of DERs where they can provide the most value (e.g.,
New York’s Value of Distributed Energy Resources
proceeding or other tariff-based approaches).
Experience in the near term can also inform the
development of practices to address equity issues
with geo-targeted pricing or programs to ensure
customer understanding and satisfaction, even
if neighbors may be faced with different rates or
program options.
• Identifying and expanding the range of services
NWS can cost-effectively offer. Early experience
with non-wires solution projects can test the range of
distribution needs that NWS can address, fostering
innovation while avoiding duplicity of pilots. Results
of early projects can inform predictions of the cost-
effectiveness of non-wires solution opportunities, so
that projects can be screened more accurately for
commercial viability.
• Testing the relationship of NWS with related utility
and regulatory reform efforts. Emerging NWS
portfolios across the US relate directly to broader
grid modernization efforts, including integrated
distribution planning proceedings and the concept of
independent distribution system operators. Further
pursuit of NWS within these broader efforts can
highlight how planning processes can consider NWS
without requiring formal screening criteria, and how
DER participation in wholesale markets may impact
the non-wires solution deployment and performance
as DERs are increasingly used to provide grid
services at multiple levels of the grid.
Regulators, utilities, and technology or service
providers all have a role to play in streamlining
processes to enable a lower-cost grid. Experience
to date has demonstrated a business case for NWS
across a wide range of utility territories, available to
be pursued by utilities and vendors if a supportive
regulatory framework is in place. The Non-Wires
Solutions Implementation Playbook lays out best
practices and provides practical guidance for
developing key elements needed for implementation.
It also highlights areas for future exploration as the
market evolves. To further scale NWS by proving out
the broader case for its application, there is a pressing
need for more coordinated efforts to build on the
lessons learned and find least-cost, best-fit solutions
and processes that work across the wide variety of
utilities and states that stand to gain.
1 “US Utility Investment Is Booming, but Sales Are Not
Keeping Up,” Bloomberg, 2018. https://about.bnef.
com/blog/u-s-utility-investment-booming-sales-not-
keeping/.
2 Paul Alvarez and Dennis Stephens,
“Modernizing the Grid in the Public Interest:
A Guide for Virginia Stakeholders,” October
5, 2018, https://static1.squarespace.com/
static/598e2b896b8f5bf3ae8669ed/t/5bbe4f
71e2c4835fa247183f/1539198852367/GridLab_
VA+GridMod_Final.pdf.
3 “Non-Wires Alternatives Projects: Emerging
Utility Revenue Sources for the Distributed Energy
Market,” June 23, 2017, https://www.woodmac.com/
reports/power-markets-non-wires-alternatives-
projectsemerging-utility-revenue-sources-for-the-
distributed-energy-market-58115883/.
4 Sue Tierney, “Value of ‘DER’ to ‘D’: The Role of
Distributed Energy Resources in Local Electric
Distribution System Reliability,” April 21, 2016, http://
www.analysisgroup.com/uploadedfiles/content/
news_and_events/news/tierney_value_of_der_to_d_
cpuc_thought_leaders_workshop_4-21-2016.pdf.
5 Sue Tierney, “Value of ‘DER’ to ‘D’: The Role of
Distributed Energy Resources in Local Electric
Distribution System Reliability,” April 21, 2016,
March 31, 2016, http://www.analysisgroup.com/
uploadedfiles/content/news_and_events/news/
value_of_der_to _d.pdf.
6 Mark Dyson, James Mandel, et al., The Economics of
Demand Flexibility, RMI, 2015, https://rmi.org/insight/
the-economics-of-demand-flexibility/.
7 Mark Dyson, 4 Ways Demand Flexibility Can Enable
a Low-Carbon Grid, RMI, October 1, 2015, https://rmi.
org/blog_2015_10_01_4_ways_demand_flexibility_
can_enable_a_low_carbon_grid/.
ENDNOTES
16 | ROCKY MOUNTAIN INSTITUTE
22830 Two Rivers Road
Basalt, CO | 81621 USA
www.rmi.org
© December 2018 RMI. All rights reserved. Rocky Mountain Institute® and RMI® are registered trademarks.
RO
C
KY MOUNTAIN
INSTIT UTE